VIEWPOINT
Competitive regional hub MOROCCO provides an excellent platform for reaching a wide range of international markets due to its geographic location and By Sridhar Sridharan
cultural ties
Business environment According to a report issued by the World Bank and the International Finance Corporation (IFC), Morocco was the top market reformer in the Middle East and North Africa region in 20052007. Morocco serves as a competitive regional hub due to its attractive incentives for investment, which include a competitive cost of production, a strong and modern banking sector, transparent and vigorous IPR laws, a flexible labour law, and several Free Trade Agreements, including with the EU and the US. Its political, economic, geographical and financial proximity to the European Union contributes to the dynamism of the economy. Due to their geographical and cultural proximity to Europe, the ability of Moroccans to speak diverse languages like Arabic, French and Spanish and low labour costs make Morocco an attractive destination for foreign investors. The country also provides an excellent platform for reaching a wide range of international markets due to its geographic location and cultural ties.
Economic overview Morocco’s economy is considered a relatively liberal economy governed by the law of supply and demand. Investors’ confidence in Morocco’s economic environment continues to grow. Morocco has the second-largest non-oil GDP, behind Egypt. Since the early 1980s, the Moroccan govern42
January 2010
ment has pursued an economic program toward accelerating economic growth with the support of the International Monetary Fund, the World Bank, and the Paris Club of creditors. The country’s currency is now fully convertible for current account transactions. Reforms in the financial sector have been implemented and state enterprises are being privatised. The government aims to liberalise and open the economy to foreign competition and diversify and develop other sectors, especially tourism.
Incentives Morocco has set in place 16 regional investment centres that enable investors to register their companies within 48 hours, reducing bureaucracy and lowering the cost of starting a business. The Kingdom offers the same tax incentives to domestic and foreign investors. Companies can benefit from various tax exemptions and tax reductions as listed below. Permanent tax exemptions are available to certain entities like non-profit organisations and cooperatives Export companies are exempt from tax on profits related to their export turnover during the first five years following their first export transaction. These companies benefit from a reduced rate of 17.5 per cent in subsequent years
Mining companies and companies established in the area around Tangier benefit from a reduced rate of 17.5 per cent Export companies established in Moroccan freezones are exempt from corporate income tax for the first 5 years of activity and are subject to a tax rate of 8.75 per cent for the following 20 years Companies holding a hydrocarbon exploration and production permit are exempt from corporate income tax for 10 years Companies located in special economic areas benefit from a reduced rate of 17.5 per cent Banks and holding companies located in offshore zones benefit from a reduction in corporate income tax for the first 15 years of operation
Business entity structures Foreign investors can use any of the legal forms listed below to conduct business activity in Morocco. The most common legal forms of business entity are the public limited company and the private company with limited liability. Companies should register with the local trade registry, the tax and social authorities.
Limited Liability Companies (SARL) In a Limited Liability Company (LLC) the liability of the shareholders is limited and shares are not freely transferable. The minimum capital require-